The Economic Expansion Incentives (relief from income tax) Act provides a range of income tax incentives to encourage investment and industry in Singapore, particularly in the engineering and technology sectors. Since the Act was passed in 1967, it has been amended from time to time to clarify and broaden the tax incentives available to various industries.
The latest amendment to the Act, which took effect on October 15 1996, introduces incentives for companies certified by the government as 'development and expansion' companies engaged in 'qualifying activities', which include the manufacturing of products of economic benefit to Singapore, engineering and technical services, computer-based information and computer-related services and industrial design services. Such companies can, if offered the incentives, enjoy a concessionary income tax rate of not less than 10% on expansion income derived from qualifying activities for periods up to 10 years, extendable up to 20 years. Shareholders of such companies will also enjoy an income tax exemption on dividends paid from the income subject to the concessionary tax rate.
The 1996 amendment also allows the granting of investment allowances of up to 100% of the fixed capital expenditure (instead of the former 50%) incurred by certain types of companies (including companies engaged in qualifying activities mentioned above) on projects approved by the Ministry of Trade and Industry.